ATFMB – Used Video Games

On August 10, 2011, in ATFMB, by Patrick Hester

I’ve been trying to come up with a format / column for me to contribute to Functional Nerds for quite some time, but nothing ever seems to feel right to me. Then I realized that I’ve already created it.

So welcome to All Things From My Brain.

Used Video Games

I buy 95% used video games. There are a lot of reasons for doing this, the biggest being cost.

I’m old enough to remember when there was no such thing as used games. Growing up in Fresno, my friends and I each had the original, 8-bit NES system (I also had an Atari 2600, and a friend had ColecoVision). We would saddle up and head out to the other side of town and visit the ToysRUs to browse video games. We would pay ‘full price’ for some games, Legend of Zelda, Metroid and Final Fantasy come to mind, as soon as they hit the shelves. But we would also wait for the price of certain games to drop to something we could afford if we thought we could wait. $40-$50 bucks a pop was expensive. We preferred the $20 range. If a game dropped in price fast, you sorta knew it sucked. If it took forever, you knew it was worth the wait.

(Side note – anyone remember when 7-11 started selling video games? I wanna say it lasted about a year. They sold Atari 2600 games and it was towards the end of that systems run as console-supreme.)

Then came the video store. They started renting games. To us, this was heaven. Everyone had blown their savings on a sucky game once or twice, so the ability to rent the game and try it before you buy it was amazing. Sometimes, a game would be worthy of purchase, but you’d beat it in those 2 or 3 days you had it rented (usually we’d go after school on Friday, rent a game, then camp out the rest of the weekend if it was a decent game) so you wouldn’t bother buying it after all.

Imagine our surprise when the Blockbuster’s of the world (for us, it was Fresno Video or Major Video) started selling those games, the ones people had rented, usually for a massive discount versus a brand new copy (that’s how I got Battletoads and Tetris, both of which were always sold out at ToysRUs). You had a sort of ‘buyer beware’ thing going on (they usually posted some sort of sign telling you that the games were sold ‘as-is’). It reminded me of used car companies selling old rental cars.

You’ve rented cars before. You know how you treated those cars. Don’t get me started on what you did that one time in the backseat when you and your significant other were drunk and feeling frisky.

Regardless of the condition of the games, they were onto something. People were buying the used games. Before you knew it, stores were popping up whose sole purpose was to sell used games. This became an industry all its own. Now, those stores sell a mix of used and new, but the used inventory far exceeds the new.

I buy used games because of the price and because I don’t have to have the latest, greatest game, as soon as it hits the shelf (with a few, notable exceptions like: Batman:Arkahm Asylum, SpiderMan: Shattered Dimensions and Ghostbusters – yes, Ghostbusters). I’m patient if it will save me $40. (I am still stuck in that $20 sweet spot). So this means, I will go in, look around, find the hot games, and wait for them to come down in price. When I play the game right, I can get three games that were hot a couple months ago for the price of the latest and greatest on the shelf today.

The video game industry hates me.

I have friends in the video game industry – everyone from marketing to development to art. A couple weeks ago, I was talking to one of my friends online. This person is a developer. I mentioned the used game thing and he said that he really feels bad for people like me, people who are being taken advantage of by the used game sellers. This piqued my interest, so I asked him to elaborate. He said something about how buying a used game for $5 less than the retail price of a new game is bad for everyone involved.

He’s not wrong. But that’s not what I do, and I explained that to him. There’s a part of me that feels a little guilty. These video game companies can’t afford to sell me a brand spanking new, hot off the presses video game for $20 – they just can’t. The industry has grown too much for that. I think there’s probably a model out there that would support this price point, but there’s not a single company out there who would try it. No one will leave money on the table, and if the majority of people are willing to pay $60 for a video game, then that’s what they are going to be charged.

(Side note: If you don’t believe me, look at how much you paid for gas at your last visit to the pump. That price, too, is based on what the market will bear. If the first time gas hit $3 a gallon, 50% of all American’s had stopped buying gas altogether, I guarantee you we’d have $1 a gallon gas today.)

(Other Side note: The handheld game market is completely different. With the popularity of the iPad and other smartphones as game platforms growing, the $0.99 model for a sidescroller game is quite viable.)

Here’s the rub for the video game companies – they only make money on the 1st sale of a game. If you take that game into a used store and trade it in, and the store sells it to someone else, the company who developed it doesn’t make a dime. When that person brings the game back and trades it in again, and the store resells it again, the dev company still doesn’t make a dime.

See the problem the video game industry has? I mean, it’s very altruistic of them to say that they are only thinking of me and that $5 difference between new and used, but honestly, what they are thinking about are those used sales they aren’t getting a cut of.

Oh, and there is absolutely nothing illegal about what the used store is doing. They aren’t bootlegging copies, or selling copies that fell off the back of a truck. They’re selling games that you and I don’t want anymore. We take them in, are paid for doing so, and they turn around and resell them. It’s almost no different than you setting up a table on your front lawn with a sign that says, “Yard Sale” and selling all the crap in your house you don’t want anymore. You don’t think twice about selling your old refrigerator, so why would you think twice about selling the video game you’re done with?

Do you think about the people who created the video game when you buy it? I know I don’t. They got paid and paid well (depending on who you ask) for the work they did. They sold maybe 500,000 copies of the game at $60 a pop – that’s $30,000,000. Now, they didn’t actually get all of that money. The retailers took a cut, and the marketing people, and this company or that company – lots of people have their fingers in that pie. Let’s assume just for illustration purposes that the people who actually developed the game made 25% (because that’s easy to figure out). That means they made $7,500,000. To you and I, that’s nothing to sneeze at. But consider that hundreds, possibly thousands of people can be involved in a games development and suddenly you are looking at break even kind of money.

Now imagine how irate those people are when someone sells the used game for $50, and they sell it 100,000 times. That’s $5,000,000 that the people who developed the game never saw a dime from. Again, nothing illegal, but you can start to see where they might have an issue. For them, an additional 100,000 sales would mean an extra $1,250,000 in revenue for the company.

Worse, the used games are all from that original 500,000 order. Had there been an additional 100,000 copies ordered by retailers, the company could potentially make an additional $1mil AND be better positioned for their next game because one of the factors they look at is how many units you sold, how many went unsold, etc. So if you sold all 500k and had to order a100k more copies due to high demand, well, you’d be much better positioned next time you launched a new game.

The flipside is that any retailer stuck with inventory of a video game that isn’t moving/selling, is unlikely to order as many from you the next time you put out a game. Heck, they may not order any at all. You just don’t know.

So this whole secondary market for used games A) does benefit the person like you or I who is just looking for a short-term saving, B) doesn’t help drive future sales for the video game company who created the game, and C) doesn’t see the people who created the content compensated for the additional sales of the used medium.

Kinda sucks, right?

Next time on ATFMB, I’ll take a  look at Used Books.

5 Responses to ATFMB – Used Video Games

  1. Used books and used games do have the disadvantage of not supporting the very creators we depend on to make more of them.

    So what do I do? I don’t buy used books much unless a book is out of print and there seems to be little prospect of an ebook in the near future.

    As far as games, I am switching slowly and surely to digital distribution mechanisms like Amazon, Steam and Impulse. I watch and wait for bargains. I’ve been waiting for a sale for Dragon Age II for quite a while now…

    • Paul – the digital content is the industry’s answer to used games. If they only give you part of the game at the retail counter, and you have to pay to stream the rest online, they can recoup some of those lost dollars.

      Problem 1 comes from the ISP’s. With the trend now to charge people more than the base service contract pricing if they are streaming ‘excessive’ amounts of content online, people will pick and choose what they will and won’t stream. It has the makings of a major problem and it’s growing fairly quickly.

      Problem 2 comes from people who don’t want to connect to the Internet just to play a game. There are loads of folks out there who just want to put the disc in and play the game without having to mess with going online.

      Next time, I’ll talk about used books and the impact buying and selling them have on the authors.


      • That is a fair problem, even with disc games. There is a big controversy about some games (even on DVD) mandating a permanent internet connection in order to work.

        Bandwidth is unfortunately not an infinite resource.

  2. TW says:

    Erm, it may not be legal to resale games (well software packages more than hardware)…depending on how the courts end up coming down on EULA enforcement.

    For example, the 9th Circuit (vernor v autodesk) has said that since the software’s EULA was actually worded more like a lease it did not meet the “first sale” doctrine and “resale” wasnt kosher.

  3. ganymeder says:

    I think you are crediting used game sales as taking more away from game producers ryan they really are. I get games if I see a good price, but if I had tio pay $50 every time I wanted a new game?- well, I’d find a cheaper form of recreation. Not every person who buys a used frame is a customer who would buy it new otherwise.

    Besides, I can even borrow games from the library now for free. It’s a nice way to see if the game (cookbook, whatever) is something I’d want to own.

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